MSPA3

Companhia Melhoramentos de São Paulo, traded on B3 under the tickers MSPA3 and MSPA4, is one of the country’s most traditional companies, with origins in the 19th century. Its history dates back to 1877, when Colonel Antônio Proost Rodovalho began lime production activities on his farm on the banks of the Juqueri-Guaçu River, in a region that would come to be known as Caieiras. A few years later, in 1890, Companhia Melhoramentos de São Paulo was formally incorporated, initially focused on paper manufacturing and urban infrastructure in São Paulo, in a context of rapid economic expansion in the state capital. Over the following decades, the company diversified its operations, integrating paper production, publishing activities, and its own energy and transportation infrastructure to support its industrial base in Caieiras.

From early on, the company combined industrial production and publishing activities. At the turn of the 20th century, it began supplying paper to the Bühnaeds & Cia. printing house and publisher, where brothers Otto and Alfried Weiszflog worked and would later become central figures in the company’s history. In 1915, the publisher associated with the group released “O Patinho Feio” (“The Ugly Duckling”), considered the first children’s book printed in Brazil, signaling a more structured entry into the publishing market. In 1920, a corporate integration took place between Weiszflog Irmãos and Melhoramentos, consolidating a conglomerate that brought together a forestry base, paper production, and publishing activities. In the 1920s, the company expanded its paper production capacity and broadened its book catalog, strengthening its presence both in the paper value chain and in literary content.

Throughout the 20th century, Companhia Melhoramentos de São Paulo deepened its operations in planted forests and pulp. In 1942, it incorporated Fazenda Levantina, in Camanducaia (MG), where it initiated production of the first Brazilian pulp. In 1946, it achieved production of pulp from eucalyptus in Caieiras, a significant technical milestone for the sector. Since the 1920s, the company had already been carrying out large-scale renewable eucalyptus planting, a practice that intensified over time and gave rise to its current high-yield fiber operation. In 1982, it innovated by starting production of CTMP-type pulp from eucalyptus, a technology that enabled the development of specific applications such as toilet paper made from this raw material.

In its current structure, Companhia Melhoramentos de São Paulo operates predominantly as a holding company for non-financial institutions, focused on equity stakes in other companies and on managing its real estate assets. The group organizes its operations into three main fronts, classified as high-yield fiber, publishing, and real estate segments. In 2024, according to consolidated financial statements, the high-yield fiber segment accounted for approximately 85% of net operating revenue, while the publishing segment represented about 14% and real estate 1%. The company manages three farms – in Caieiras and Bragança Paulista, in the state of São Paulo, and in Camanducaia, in Minas Gerais – in addition to its headquarters in the city of São Paulo, which is also used for leasing corporate spaces, an auditorium, and event areas.

The group’s forestry and industrial arm is concentrated in the subsidiary Melhoramentos Florestal Ltda., responsible for silviculture, afforestation and reforestation activities, as well as the production of high-yield fibers from reforested wood, especially pine and eucalyptus. The production process involves wood defibration, and the company also provides forest management services for its own and third-party reforestation areas. The fibers produced are supplied to industrial customers and distributed through direct sales, using highway logistics. Melhoramentos Florestal is estimated to hold around a 32% share in its high-yield fiber market, in a context of internationally favorable pulp prices, although with increased local competition since the entry of a new competitor in 2018. This revenue concentration is also reflected in the customer base, as three buyers account for about 93% of this subsidiary’s revenue.

The publishing segment is developed through a group of subsidiaries, including Editora Melhoramentos Ltda., Melhoramentos Livros Ltda., Cora Livros Ltda., Jaguari Livros Ltda., Melhoramentos Livrarias Ltda., Melhoramentos Melius Ltda., Melhoramentos Manguinhos Ltda., and Terras Bonsucesso Ltda. These companies operate in editing, layout, text and illustration production, as well as in the publication and commercialization of books, literary content, and educational and cultural materials in different formats. Distribution is carried out through outsourced logistics, distributors, and sales representatives. Editora Melhoramentos specifically estimates it has around a 1% share in a highly fragmented market, affected by the crisis in book retail and competition from other forms of entertainment such as streaming and gaming. In 2024, the publishing segment accounted for approximately 14% of consolidated operating revenue, also supported by a concentrated customer base, with three buyers representing 44% of the publishing subsidiary’s revenue.

A third pillar of the conglomerate is linked to real estate development and exploitation. Several subsidiaries, such as Altea Empreendimentos Ltda., PLD Cajamar V Empreendimentos Imobiliários S.A., Engelote Incorporações e Urbanismo S.A., and Setor K Empreendimento Imobiliário SPE Ltda., focus on the purchase and sale of properties, land subdivision, development and construction, management and leasing of owned assets, with an emphasis on properties for logistics use. There is also a silent partnership (Sociedade em Conta de Participação) with Swiss Park Caieiras Incorporadora SPE Ltda., established in 2018, for the development of a real estate subdivision on the company’s land in Caieiras (SP). Although the real estate segment represents a small share of net operating revenue – around 1% in 2024 – it is directly related to the utilization of the portfolio of land and industrial assets historically accumulated by the company.

Companhia Melhoramentos de São Paulo and its subsidiaries operate predominantly in the domestic market and do not have significant revenue abroad, and therefore are not subject to international market regulations. From a domestic regulatory standpoint, the main exposure is concentrated in Melhoramentos Florestal, which depends on environmental and sanitary licenses for its operations. The agencies involved include the Instituto Estadual de Florestas (IEF) and the Minas Gerais Department of the Environment (SUPRAM) for licensing processes and forest certification, as well as ANVISA for molded pulp packaging production. In dealing with suppliers, energy regulation stands out, as it is a public utility service subject to ANEEL rules, and there is also control over tax-exempt paper (papel imune) applied to publishing operations, governed by SEFAZ/SP and the Federal Revenue Service regulations.

In environmental, social and governance (ESG) terms, the company maintains a formal structure of policies and reporting. It publishes an annual sustainability report based on GRI and SASB standards, and since fiscal year 2022 its carbon emissions inventory has been audited by an independent firm. In 2023, it developed its ESG materiality matrix and considers several UN Sustainable Development Goals as priorities for its business, including topics related to education, water, clean energy, decent work, innovation, responsible consumption, climate, and life on land. The subsidiary Melhoramentos Florestal holds pure FSC (100%) certification and adopts a Forest Development Policy that emphasizes sustainable management, ecosystem protection, conservation of water resources, and compliance with environmental and labor laws in São Paulo and Minas Gerais. The company also maintains a Socioenvironmental Responsibility Code for Suppliers and incorporates sustainability and ethics aspects into its Code of Conduct, reinforcing corporate governance guidelines applicable to the entire conglomerate.

MSPA3 and MSPA4 shares therefore represent an interest in a corporate group whose activities are concentrated in high-yield fibers for industry, supported by a certified forestry base, complemented by a book and educational content publishing business and a portfolio of real estate assets focused on logistics use and urban development. This combination of segments, with a strong weight from the forestry-industrial business, is influenced by factors such as pulp price dynamics, concentration of industrial customers, the competitive environment in the Brazilian publishing market, and the economic utilization of a historically assembled real estate portfolio in strategic areas of São Paulo and Minas Gerais.